The election of Donald Trump was an event that, like Brexit, was foreseen by very few people, and, like Brexit, it leaves the world’s financial markets feeling some anxiety.
Futures markets, which had been up on expectations that globalist Democrat Hillary Clinton would be the next president, took a colossal dive on Tuesday evening as it became clearer and clearer that Trump was going to pull off a towering upset victory.
Futures contracts, which plunged as much as 1,000 points on the news, quickly recovered, but the taint of uncertainty and nervousness has traders on edge as politically, this election has pushed the leadership of the world’s most powerful nation into unknown territory.
The fact that Trump is not a traditional politician and that he’s announced policies that have shocked and confused some, especially regarding defense, free-trade agreements, manufacturing and health care, has given the market serious jitters that may not go away easily.
A day or two after Trump’s election was confirmed, many markets had recovered from losses and even headed upward on the expectation that Trump is a no-nonsense, pro-business, anti-tax candidate. Indeed, the hope that Trump could positively impact America’s trade deficits, its GDP (which for the first time in decades did not have a year where it rose to three percent under President Obama) and its employment levels have given reasons for cautious optimism.
For many, the immediate aftermath of the election was a buying opportunity, as the prospect of a livelier economy under Trump than under Hillary Clinton began to make itself known. Tim Ghriskey, the chief investment officer at the Solaris Group said, “Anything that Trump mentioned during the campaign, any industry he has mentioned, favorably or unfavorably, is moving… big time.”
Asian and European markets were up as well as commodities such as precious metals. The Dow Jones Industrial Average saw record highs two days after the election. The S&P 500 and Nasdaq indexes each climbed 1.1 percent.
In contrast, emerging market and other currencies, such as the Mexican peso and the Chinese yuan, crashed as fears over Trump’s potential handling of trade caused deserved concern in markets where labor is cheap and working regulations are loose. It’s reasonably anticipated that Trump may formally accuse China of manipulating its currency.
There are fears about inflation due to potential tariffs being enacted by a Trump administration, and bond yields were down. Losses in the bond markets were in some cases greater than at any other time since 2013. Bond investors lost a collective third of a trillion dollars two days after the election as markets absorbed the news.
Overseas in Europe, fears about similar political upsets occurring over the next 12 months in countries such as Italy and Germany sent foreign bond prices up.
Technology stocks are down as previous expectations that potential H1-B visa reforms for many of tech firms under a Hillary Clinton presidency were dashed; the stocks of Apple, Amazon and Google were all trading lower.
Private prison operator stocks were up sharply, as Trump has indicated he may renew contracts with such firms when he gets into office. One such operator, the Corrections Corporation of America, saw its stock gain 43 percent in a day.
Anticipation of Wall Street deregulation drove bank stocks higher, and pharmaceutical issues gained as those companies will likely not face the regulatory pressure that had been threatened by Hillary Clinton. Stocks of construction equipment firms such as Caterpiller and Deere were up in anticipation of Trump’s U.S.-Mexico border wall getting built.
Health care issues were down due to the potential gutting of Obamacare under Trump, and gun manufacturer stocks were lower due to the pressure easing on people to buy guns before Second Amendment limitations might have been enacted.
Business leaders were slightly upbeat about Trump’s victory, with JPMorganChase CEO and good Trump friend Jamie Dimon saying, “I’m optimistic about America’s future and the role our company will continue to play as we help the nation address our challenges and move forward together.”
Chief investment officer Stefan Kreuzkamp from Trump lender Deutsche Bank was even more enthused, saying, “Our hopes are based on Trump’s pragmatism, his ability to adapt and his generally limited political allegiance.”
Neither Lloyd Blankfein, the CEO of Goldman Sachs nor Michael Corbat, CEO of Citigroup — both of whom were Hillary Clinton supporters — issued statements, although Citigroup predicted in a research note in August that a Trump presidency “could trigger a US and global slowdown” — this was probably based more on fear than anything else.
Interest rates, which had been expected to rise under a Clinton presidency, are less likely to go up under Trump. “Given the adverse market reaction we have already seen, the Fed’s planned December rate hike is now off the table,” stated Paul Ashworth, the chief U.S. economist at research firm Capital Economics.
Ashworth even believes there is a chance Fed chief Janet Yellen may resign under a Trump presidency because of voter sentiment that the Fed has been ruled too much by politics.
Here’s hoping to that!
Regards,
Ethan Warrick
Editor
Wealth Authority
